Failed Korean Debt Sale

With tsunamis of sovereign debt being issued around the globe i think news like this will pop up on a regularly basis ( especially for those countries mentioned in So Begin The (Serious) Sovereign Downgrades…? ). This also raises the question what will happen to spreads on corporate bonds ( see Death of Corporate Bonds Is Worth Investigating from William Pesek/ Bloomberg ) .... It will be interesting to see if some countries will be forced to issue debt in foreign currencies if even higher yields are failing to attract enough investors.....And lets all hope that the central banks are resisting the call to be the buyer of last resort ( monetize the debt )..... This would almost definitely lead to trouble down the road......

Mit der nicht enden wollenden Flut an neuen Staatsschulden rund um den Globus dürften vergleichbare Meldungen bald öfter über die Ticker laufen ( verweise in diesem Zusammenhang auch besonders auf die Staaten die in dem folgenden Link angesprochen werden So Begin The (Serious) Sovereign Downgrades…? ). Desweitern muß man sich fragen was solche Ereignisse für Unternehmensanleihen bedeuten ( sieheDeath of Corporate Bonds Is Worth Investigating from William Pesek / Bloomberg ) ..... Entscheidend wird sein ob bestimmte Staaten gezwungen werden einen Teil Ihrer Verbindlichkeiten in Fremdwährungen zu begeben wenn selbst steigende Renditen nicht mehr ausreichen um genügend Investoren anzuziehen..... Bin gespannt ob auch dann die Notenbanken sich dem Druck widersetzen und nicht als Käufer auftreten ( sprich die Notenpresse anzuwerfen )......... Das dürfte eher früher als später zu großen Problemen führen.....

Korea Fails to Meet Target in Bond Sale for 2nd Month

South Korea failed to meet its target at an auction of 10-year bonds for a second consecutive month on concern that the nation will increase debt sales to fund stimulus spending.

The government raised 584 billion won ($415 million) at today’s sale, less than the 800 billion won targeted, after investors offered to buy 604 billion won, the finance ministry said on its Web site. The securities were sold at an average yield of 5.2 percent, higher than the 5.1 percent the market expected, said Kim Do Sung, a futures trader with PB Futures Co. in Seoul.

“The market has shown little interest in longer-dated debt,” Kim said. “The trend may continue for a while as concern about oversupply lingers.”

Investors including Pacific Investment Management Co., which runs the world’s biggest bond fund, and DBS Asset Management Ltd., are avoiding long-term securities as governments fund extra spending by increasing debt sales. Asian nations have pledged an additional $685 billion over the next five years to support growth after recessions in the U.S., Europe and Japan caused exports in the region to collapse.

In a Jan. 19 auction, the Korean government sold 426 billion won of similar-maturity debt, failing to raise a planned 800 billion won. Malaysia attracted bids for 1.46 times the 3.5 billion ringgit ($967 million) of five-year notes sold on Jan. 22, the weakest bid-to-cover ratio since May 2008. The Philippines rejected all bids from investors for 7 billion pesos ($148 million) of treasury bills at an auction on Feb. 9 in Manila.

Curve Steepens

The extra yield that investors are asking to hold 10-year Korean bonds over those maturing in three years widened to 1.63 percentage points last week, the most since November 2001. The spread was 81 basis points at the end of 2008.

Asian local-currency government bonds have handed investors a 4.3 percent loss this year, after rallying 9.7 percent in December, when interest-rate cuts by central banks drove down yields, according to indexes compiled by HSBC Holdings Plc.

Borrowing costs will climb in the region this month as policy makers increase spending to revive their economies, Mirae Asset Investment Management Co. and CIMB-Principal Asset Management said.

India, the Philippines, Thailand, Korea and Malaysia were scheduled to sell at least $3.8 billion of local-currency bonds maturing in 10 to 30 years in February.

“The deeper the recession, the more the stimulus and the more the bond supply,” Kim Sung Jin, head of debt investment at Mirae, South Korea’s biggest asset manager with the equivalent of $43 billion under management, said last week. “The long-end maturities are the most vulnerable.”

Yields Rise
South Korea has already allocated 51 trillion won in tax cuts and infrastructure projects to shore up the economy, and the government needs to increase its budget spending to revive growth, Deputy Finance Minister Noh Dae Lae said on Feb. 12.

The yield on Korea’s 10-year government debt rose one basis point, or 0.01 percentage point, to 5.20 percent today compared with 4.22 percent on Dec. 31, according to Korea Securities Dealers Association. The rate averaged 5.15 percent over the past five years, according to data compiled by Bloomberg.

“Asian local-currency yield curves have bear-steepened so far this year on supply concerns, but more steepening lies ahead as 10-year yields remain below their long-term averages,” said Jens Lauschke, a fixed-income strategist at DBS Group Holdings Ltd. in Singapore.

Banana Republik Watch "Korea Edition"

Oh boy....... At least they have still a few people left in Korea paying attention to analysts at all....... Sooner or later they will realize that they very often provide the best value as an contrary indicator ( see Wall Street Finest ) .......

Leider kein Witz...... Immerhin gibt in Korea anscheinend noch einige die überhaupt einen Pfifferling auf das Urteil von sogenannten Analysten setzen....... Ich nutze Sie seit Jahren nur noch als Kontraindikator bzw. zur wenn ich mal wieder was aus den Rubriken Satire & Science Fiction lesen möchte....... Spare mir so das Abo der "Titanic"...... :-).... Hier ein paar Beispiele ( siehe Wall Street Finest )......

South Korea to investigate foreign brokerages (FT) South Korean’s broking regulator is to

investigate all “sell” recommendations by foreign brokerages

made in the last three months in the wake of a fall of nearly 40 per cent in the benchmark Kospi index this year.

The Korean Securities Dealers Association said on Wednesday it had asked 19 foreign brokerages, including JP Morgan, Goldman Sachs and Credit Suisse, to submit all “sell” reports on Korean shares issued between September and November.

“The public consensus is that foreign research reports are having a negative impact on stock prices

,” the KSDA said. “The public see some problems about their fairness so we want to review the reports.”

The association said it expected to receive the “sell” reports by the end of this week, and would review “whether their reports are fair or whether their sell calls were based on proper reasons.”

However,

the association is not asking for research reports from local brokerages, which rarely issue “sell” recommendations

The KSDA conducted a similar probe into both domestic and foreign brokerages two years ago.

The investigation follows growing complaints by local companies against foreign research reports recommending “sell” on their shares.

In October, the FSS warned JP Morgan about a research report recommending that investors sell Hana Financial Group shares, saying that the recommendation was based on “too conservative” non-performing loans ratio.

JP Morgan later terminated coverage of Hana, saying that it cannot have access to necessary information critical to its research. JP Morgan declined to comment on the case.

In September, Goldman Sachs issued a “sell” report on Kookmin Bank, the country’s biggest commercial lender. Kookmin immediately replaced Goldman Sachs with Merrill Lynch as its adviser for selling treasury shares.

Foreign brokerages in Korea have long been plagued by suspicions that “sell” calls are linked to short-selling activities. Financial regulators have undertaken a separate investigation into short-selling but the results have yet to be announced.

Foreign brokers dispute these claims. “It is nonsense. We have strict standards against such practices. We have a strong firewall between research and investment departments,” said a senior official at a foreign brokerage. “We wonder if the probe is really to protect investors.”

The investigation has sparked strong resistance among foreign brokerages, whose reports are increasingly influential in the local stock market.

“We are completely flabbergasted by this move. Analysts independently issue their opinion for institutional investors, based on their research and insight into the companies. It is totally up to our clients and investors whether or not to take the view,” another foreign brokerage said.